Ase Technology Holding ((ASX)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Ase Technology Holding painted a mixed picture of the company’s financial health and strategic direction. While there were notable advancements in the ATM and testing business segments, driven by technological improvements and favorable foreign exchange impacts, challenges in the EMS segment due to seasonal declines and increased operating expenses affected overall profitability and revenue. The sentiment of the call was balanced, reflecting both positive and negative elements.
Strong Year-Over-Year Growth in ATM Business
The ATM business segment showcased robust growth, with revenues reaching $86.7 billion, marking a 17% increase annually. The gross profit margin for this segment also improved, rising by 1.6 percentage points year-over-year to 22.6%. This growth underscores the company’s successful strategies in enhancing its ATM offerings.
Test Business Momentum
The test business continued to demonstrate strong momentum, achieving a 2% growth in what is typically a seasonally down quarter. This segment is projected to constitute 19% to 20% of the overall ATM revenue by the end of the year, up from 18%, indicating a positive trajectory in this area.
Positive Impact from Foreign Exchange
The depreciation of the NT dollar had a favorable impact on the company’s gross and operating margins, contributing 0.6 percentage points sequentially and 1.4 percentage points annually. This foreign exchange benefit has been a significant factor in the company’s financial performance.
Improved Gross Margin
The company’s gross margin saw an improvement of 0.4 percentage points sequentially and 1.1 percentage points year-over-year, reaching 16.8%. This improvement reflects the company’s efforts in cost management and operational efficiency.
Advanced Packaging Growth
Advanced packaging services have shown impressive growth, now accounting for 10% of overall ATM revenues, up from 6% for the full year 2024. This growth highlights the company’s strategic focus on expanding its advanced packaging capabilities.
Decline in EMS Revenues
The EMS segment faced challenges, with revenues declining by $12.6 billion or 17% sequentially, primarily due to seasonal factors. This decline has been a key concern for the company’s overall revenue performance.
Overall Revenue Decline
Despite a 12% year-over-year increase, consolidated net revenues declined by 9% sequentially. This decline underscores the mixed financial results the company is experiencing.
Increased Operating Expenses
Operating expenses increased by $1.9 billion annually, reaching $15.2 billion, largely driven by R&D and labor costs. This rise in expenses has impacted the company’s operating profit.
Sequential Decline in Operating Profit
Operating profit for the quarter was $9.7 billion, down $1.5 billion sequentially. This decline reflects the challenges the company faces in managing its operational costs.
Higher Tax Rate
The effective tax rate for the quarter was 20.6%, higher than the full-year projection of slightly below 20%. This increase in tax rate has affected the company’s net income.
Forward-Looking Guidance
Looking ahead, Ase Technology Holding provided guidance for the second quarter of 2025, expecting ATM business revenues to grow by 9% to 11% quarter-over-quarter, with a gross margin increase of 140 to 180 basis points. However, the EMS business is anticipated to experience a 10% year-over-year revenue decline, alongside a 100 basis point decrease in operating margin. The company plans to maintain its current investment trajectory, focusing on leading-edge packaging and AI testing capabilities to capture market share.
In summary, Ase Technology Holding’s earnings call reflected a balanced sentiment, with significant growth in the ATM and testing segments offset by challenges in the EMS segment and increased operating expenses. The company’s forward-looking guidance suggests continued focus on strategic investments to drive future growth, despite current challenges.